What Is The Impact Of The Private Exchange World Today?

Often, a question doesn't have an easy answer in the digital advertising business. This is a column devoted to an answer to a single question or topic - and providing a bit of space for it.

Today's participant is Matt Greitzer is Co-Founder and COO of Accordant Media, media buying and optimization company. He recently answered a series of questions in a conversation with AdExchanger.com beginning with...

AdExchanger.com: What is the impact of the private exchange world today?

MG: The biggest is overall impact is positive. What I've seen with private exchange announcements from Weather.com, quadrantONE, NBCU and others is that major publishers now viewing exchange‑traded media as a legitimate sales channel, not as an afterthought or as something to be afraid of. These publishers are actually building a strategy around “uncommitted” inventory in which exchange-traded media is primary. From the buy‑side perspective, this is a very good thing because it means that there's going to be more inventory and there's going to be more inventory from established, well-known publishers with whom major advertisers are comfortable transacting.

The main drawback, coming from somebody who's looking for buy-side opportunities, is that private exchanges take a lot of the inefficiency out of the market. As publishers get more and more control over how they manage their exchange-traded inventory, it’s going to be less and less of a buyers market. But, so be it. That's the way the landscape is going to evolve. Most buyers who aren’t focused solely on the arbitrage opportunity are perfectly happy to work in that environment.

I think some people who are advocates of a pure, market-driven media exchange model are disappointed with the private exchanges and increased sell-side controls like price floors, advertiser block lists, etc. But basically them market wasn’t maturing fast enough for major publishers to be comfortable participating. The tools and capabilities enabled by private exchanges are an artificial accelerant that encourages greater participation. So while the opportunities for under-priced inventory are less and less likely, inventory volume is increasing on more and more sites with which marketers want to be affiliated. It's a trade‑off, but I think it's a good trade‑off overall.

Are the price floors accurate, in your opinion? Are publishers setting them too high?

That's a good question. I think it's still too early to tell. Pricing floors aren’t a new phenomenon, but sellers now manage them actively. I think there'll definitely be an adjustment period where sellers start to figure out what the right floors are for different pockets of inventory.

One of the most interesting developments in all this talk about automation and automated buying is that private exchanges actually necessitate an active dialog between buyers and sellers. You actually have to know the people on the supply side who are making these decisions, so you can communicate to them if those decisions are good or not.

If a private exchange sets an arbitrary price floor of $4, and it turns out that $4 is just not efficient for any of my advertisers but $3.75 is, it's kind of imperative that I can tell somebody that, so they can make that change and adjustment.

Shouldn't that get automated somehow?

I think the transactional side of it can be automated – the tactical buying and selling. But the communication and dialogue is still a very personal endeavor. It’s ironic that with this increasing automation, we're back to a place where relationships actually matter. And scale kind of matters as well. Part of the benefit of “private exchanges”, from a publisher standpoint, is they can determine who gets to buy and who does not get to buy. Even if it's a binary decision - access or no access - people with scale and people who have relationships with those private exchanges are the ones who are going to get access. And if you don't have scale and you don't have those relationships, it's going to be harder to participate in this market. That doesn't mean you're going to be shut out, but it'll be harder to get in, it may take more time, and your access may be limited. The barriers to entry today are much higher.

Any opportunities emerging with the private network or exchange model that may be less apparent?

The sell side is taking more control of their uncommitted inventory, which requires more active management on the buy side to make sure that that inventory is available, and at an efficient price. It makes you feel like there's a big opportunity for market intelligence about those specific dynamics. Are certain publishers underpricing pockets of inventory? Are they dumping impressions at the end of the quarter. And if so, can I take advantage of that as either a buyer or seller? The need for good market intelligence about this landscape is going to be greater and greater and I’m excited to see what emerges in this area.